On June 27, 2017, J. Christopher Giancarlo, acting chairman of the US Commodity Futures Trading Commission (CFTC or Commission), proposed a request of $281.5 million and 739 full-time equivalents (FTE) to finance operations for the Commission’s 2018 operations. Giancarlo explains funds will be used “to enhance economic cost benefit analysis capabilities; strengthen Commission examinations capabilities over swaps clearing houses; and address the regulatory challenges related to market innovation.” The newly requested amount is considerably greater than the President’s $250 million budget request. As per Giancarlo:
“Under my direction, the Commission has utilized its ability to provide a budget directly to the Congress. This is the first budget submission under my leadership, and I believe it is important to articulate the needs of the Commission based on my perspective and vision for a renewed and refocused CFTC.”
Giancarlo continued, “Without the requested increase, the CFTC will continue to rely on outdated, anachronistic models and metrics of studying our markets.”
According to Giancarlo, the $31.5 million and 36 FTE increase above the fiscal year 2017 level is justified based on an analysis of areas that will improve efficiency in Commission market structures. This includes increasing resources and staffing in order to augment the development of digital FinTech innovations, such as blockchain and distributed ledger technology. Giancarlo explains why blockchain technology is a worthwhile investment.
“According to one measure, investment has increased at a cumulative annual growth rate of more than 45 percent from 2011 to 2016. We are seeing a powerful convergence, as the costs of launching new ventures and applying new technologies have dropped enormously, while the speed and scalability with which they can be brought to market have increased dramatically.”
However, despite the potential for emerging technologies like blockchain and executable distributed code contracts to challenge foundational market infrastructure, Giancarlo believes that they remain bogged down by regulatory challenges that will hinder the ability for the US to remain competitive and transition into the upcoming digital finance era.
“The world is changing. Our parents’ financial markets are gone. The 21st century digital transformation is well underway, and the digital technology genie will not go back in the bottle. In order for the CFTC to remain an effective regulator, it must keep pace with these changes or our regulations will become outdated and ineffective.”
Giancarlo’s budget request comes months after other leading economies introduced their own initiatives to increase financial service progress. Most recently, the Chinese government unveiled its new FinTech development plan which aims to revamp the country’s financial information infrastructure. In June, Japan and Australia entered into an agreement to encourage FinTech innovation in both jurisdictions. Likewise, the Hong Kong Monetary Authority and UK Financial Services Authority publicized a similar partnership initiative in May.